Gov. J.B. Pritzker wants to build up Illinois' depleted reserve fund to help stabilize the state's financial future, but that promise depends on voters approving a progressive income tax structure at the polls in November 2020.
The governor really wants voters to trust that Illinois lawmakers will wisely spend the more than $3 billion he says a progressive income tax would generate for the state (several outside organizations have questioned the governor's revenue estimates). He's said it's the only way to steady the state's finances.
As it stands, Illinois has enough cash stashed away to operate for one-tenth of a day. That's about $10 million. Other states have managed to put away much more over the past decade as the economy has continually improved.
Michigan has socked away about $1 billion, enough cash for that state to operate for 36.1 days. Wyoming has the biggest rainy day fund. It was holding about $1.5 billion in reserve at the end of fiscal year 2018. That's enough cash for the state to operate for more than a year (366.9 days).
Illinois' nearly empty Budget Stabilization Fund doesn't need to hold a year's worth of spending in reserve. A few months worth of cash on hand would go a long way toward reassuring creditors and taxpayers that Illinois' is on the right financial track.
The fund, established in 2001, has never carried a big balance because elected officials in this state have never seen a nickle they didn't want to spend.
Lawmakers passed a resolution this spring to ask voters to change the state's constitution to allow for a progressive income tax that would have higher rates for higher earners. It would scrap the state's existing flat income tax and make it easier for the state's Democrat-controlled legislature to raise taxes on smaller groups of people.
Hiking taxes on everyone at once is unpopular. It's much easier to carve up the state's residents into smaller groups based on income and hike taxes for a subset of the state's taxpayers. It's more politically palatable.
But who can trust Illinois lawmakers?
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For the past 40 years, we've seen more of the same tax-and-spend policies that have left the state's pension systems dangerously underfunded and the state's credit just a notch above junk status.
A temporary income tax increase passed in 2011 was going to fix the state's public pension debt problem. It didn't. Pension debt continued to grow.
The permanent income tax increase in 2017 was going to solve much of the state's fiscal problems. It didn't. Pension debt ballooned to $135 billion and Illinois continued to operate on deficit budgets.
Illinois has the worst credit rating in the nation. Some investors won't even buy the state's bonds.
Given the legislature's track record, a progressive tax is a particularly unpleasant prospect.
Even more unpleasant is the realization that Pritzker knows it's good policy to put money into the state's Budget Stabilization Fund, but that he won't do it until he gets his tax hike.
Cut spending elsewhere so he can fund his priorities? No thanks. He'd rather take more from taxpayers who already shoulder one of the highest tax burdens in the country.
Pritzker promised to put $100 million into the fund each year going forward.
That's right. Of the more than $3 billion in estimated new revenue from a progressive tax if the constitutional amendment passes, the governor would put just 3.3 percent of it into the fund designed to blunt the effects of future fiscal emergencies or economic downturns — the kind of economic events that bring the state's most vulnerable residents to their most vulnerable point.
Let's face it. The state isn't going to tax its way out of the fiscal mess it's in. That's been tried many times before and has failed. And Illinois taxpayers are already fleeing to other states by the tens of thousands each year as a result.
Pritzker needs to face reality and finally push his party to seek the spending reforms that would actually put Illinois on a path to stability.